Six Arrested in California Workers Comp Fraud Cases

Six individuals in California found themselves on the wrong side of the law recently.

On June 6, five suspects associated with three paving companies were arrested in Corona on 24 felony counts of workers compensation insurance fraud, payroll tax evasion, prevailing wage fraud and denying employees workers comp insurance benefits. Losses associated with this case total $7,377,023.

“Contractors have an obligation to their employees and to their customers to maintain adequate workers compensation insurance,” said Commissioner Dave Jones. “Dodging this responsibility placed others at great financial risk and resulted in an unfair advantage to under bid professionals that operate above board and within the law.”

Three paving and striping companies, Prestige Striping Services, United Paving Co. and Yeguada Trujillo, Inc., owned and operated in Corona, allegedly paid overtime and cash bonuses and then inaccurately reported wages to their workers comp insurance carrier or the Employment Development Department.

Officials also discovered that these companies were not paying the required prevailing wages on public works projects and co-mingling their employees with Superior Pavement Markings, Inc., a union company previously owned by Sabas Trujillo.

Between June and September 2013, search warrants were served at the businesses and their banks.

Based on a review of all the records seized and the Prestige Striping and United Paving employee interviews, it was determined that these companies, along with Yeguada Trujillo, Inc., were committing workers comp insurance fraud, payroll tax evasion, prevailing wage fraud and denying employees workers comp insurance benefits.

The loss in workers comp insurance premiums is $1,014,041.66, the loss in payroll tax liabilities is $4,122,660.37and the loss in prevailing wage fraud is $2,240,321.03 for a total loss of$7,377,023.06.

Suspects arrested included owner Sabas Trujillo, his brother Rick Trujillo, his brother’s wife Lucia Trujillo, their account manager for United Paving Company, Laura Fitzpatrick and Alex Trujillo the production manager for Prestige Striping were all implicated during the department’s investigation.

Plumbing Business Owner Arrested

Meantime, Tim Shelley, 57, owner of Tim’s Plumbing was arrested recently on felony charges of workers comp insurance fraud and grand theft.

A joint investigation with the Department of Insurance and Humboldt County District Attorney’s Office uncovered Shelley’s multiple illegal business operations, alleged warranty scam and insurance fraud.

“Refusing to provide workers compensation insurance can be devastating to employees and it is illegal,” said Insurance Commissioner Jones. “California business owners should know that it is their responsibility to provide workers compensation insurance. We continue to find individuals that choose to disregard the law, but I am committed to working with our law enforcement partners to stop those who commit insurance fraud.”

During the course of the investigation, it was discovered that Shelley deliberately failed to obtain workers comp insurance for his employees. There were instances in which employees were injured and were discouraged from claiming workers comp benefits. As a result, severely injured workers were unable to afford their medical costs for treatment and suffered significant financial hardships.

Further investigation revealed that Shelley was also allegedly operating a warranty replacement scam. The scam involved removing warranty tags on water heaters installed for customers and then turning in a false warranty claim, Shelley received a number of free replacement units from the manufacturer.

Shelley was arrested on June 24.The Humboldt County District Attorney’s Office will be prosecuting the case.

If convicted, Shelley faces up to 18 years in state prison and $260,000 in fines.

Author Kori Shafer-Stack, Editor, Amaxx Risk Solutions, Inc. is an expert in post-injury response procedures and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. www.reduceyourworkerscomp.com. Contact: kstack@reduceyourworkerscomp.com.

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